Tuesday, October 12, 2010

The Folly of Public Sector Stimulus

That should have left them with no choice but to start firing public workers two years ago, when the bottom fell out of their tax revenues. (After all, the construction industry depends on the same source of revenue -- property values -- as do local governments, and residential-construction jobs are down 31 percent since 2000.)

Instead, the 2009 stimulus law sent more than $220 billion to state and local governments -- without asking them to pare their workforces or workers' benefits.

But now the stimulus cash is running out. So the state and local government jobs that it "saved" are starting to disappear, as governments around the nation do what their voters have been doing for three years now -- cutting back.

The states are finally finding out that they cannot sustain their workforce any longer without going further into debt. Now it looks like the Congress should have had some strings attached to that $220 billion to the states. If they cut their workforce by a certain amount then they would receive the money.

Many states would have banked the cash in a rainy day fund but at least the cuts would have already happened in 2008 and the recovery would be underway. They could have also used this money for generous buyouts that would get these people off the payroll in 2009 and 2010. Instead we might get another wave of firing carried out by the states who cannot afford to keep paying for these "saved" jobs going forward. I guess the 10% unemployment is here to stay.